What does it take to litigate a patent case?

I am often asked how much it costs to take a patent case through trial. And like most questions asked of a lawyer, the answer is usually, “It depends.” A number of factors can influence the cost of a patent case, many of which are out of the control of the litigating parties. A 2013 study conducted by the American Intellectual Property Law Association found that the median cost of a patent case is between $700,000 and $5.5 million, depending on how much is at stake in the case.

To better appreciate the costs involved, it helps to understand what it takes to litigate a patent case. The factors discussed below address, at a high level, the phases of a patent case in an attempt to help frame the costs, and they provide insight into when the parties should reevaluate both the legal and business strategies of a case in order to resolve the matter short of going to trial.

Initial investigation

As an initial recommendation, because lawyer’s fees make up the bulk of the costs of a patent matter, choose your legal team wisely at the outset of a case or pre-litigation investigation. Make sure all the necessary team members are identified and that they have a good chemistry working together.

Not just anyone can read a patent and tell you what it means. The United States Patent and Trademark Office (USPTO) — the only governmental body with the power and authority to grant a patent to a company or inventor — requires a separate Patent Bar exam of any lawyer or engineer who practices before the agency, and the exam can only be taken by qualified scientists and engineers; with the exception of pro-se inventors, these are the only people certified to correspond with and practice before the USPTO. This fact, coupled with the fact that patent cases often involve highly specialized invention(s), means that patent cases often require a team of specialized attorneys and experts to litigate them. These specialized attorneys and/or experts can cost considerably more than their non-specialized counterparts, who litigate typical business-related matters.

Building on the fact that the USPTO and patent law are governed by federal law, patent cases are tried in federal courts, not state courts. Each federal district (and sometimes courts within the same district) differs on how it treats patent cases, which can greatly affect the cost of a case. For example, some federal courts have local rules that deal with patent cases specifically and address topics such as claim construction, a process unique to patent cases, while other courts do not. Regardless of whether a court has specific rules regarding the claim construction process, most patent cases will involve a claim construction proceeding in some form or fashion.

As such, each venue should be evaluated before filing, or when deciding how to defend a case, to better determine the costs associated with being in a particular court. In addition to the specifics above, some courts and/or judges require the addition of a local attorney and outline how the local attorney(s) is to be integrated into the litigation team, while others do not. Probably most influential on the cost, from a venue standpoint, is the fact that some courts operate on faster case schedule than others. For example, some courts will bring a patent case to trial within a year of when the complaint was filed, while other courts can take three years or more to bring a patent case to trial. Every once in a while, the speed of a venue affects the business or legal strategies of a party, so these factors should be considered from both perspectives when evaluating a case.

Claim construction is akin to construing the terms of a contract, but it is the terms of the patent’s claims that are construed. Like a contract, the construction is based on what the rest of the patent says. Also like a contract, in certain situations, evidence outside the patent can be used to help construe the terms. Typically the parties present their differing positions to the judge, and the judge then decides on the final constructions of the claim terms. This process can involve experts and usually takes the form of a briefing, followed by a hearing where the lawyers present tutorials, arguments, and/or expert witness testimony to the judge. This process can be critical to the parties’ allegations and defenses and is usually treated as a separate event or phase of the case. If the parties are unable to reach settlement at the start of the case, claim construction is the next key point to re-explore settlement positions and reevaluate the business and legal outcomes and ramifications of the case, in light of how it has developed.

Discovery

Discovery follows shortly after claim construction, or sometimes it runs in parallel to the process. Discovery in a patent case is similar to that in other commercial litigation matters but differs in that it includes prior art searches and analysis and, usually, at least two expert witness reports and depositions for each side. Prior art searches involve identifying patents and other documentation or witnesses that demonstrate the elements of the invention at issue were known to the public before the date of the patent at issue. The best results from the prior art search become the evidence relied on to demonstrate the patent at issue is invalid and therefore unenforceable. Prior art searches, and their analyses, can be expensive. However, just like claim construction, invalidity can be case dispositive in favor of the party being accused of infringement.

Patent cases also typically require at least two experts: a technical expert and a damages expert. Cases involving complex technologies or issues often require more than two experts. Expert fees can be considerable in a patent case. In addition, litigious opponents can hamper the discovery and expert discovery processes and increase motion practice, thereby increasing the costs of a patent case.

In comparison to the total cost of the litigation, the AIPLA Report of the Economic Survey 2013 found that the median cost of a patent case through discovery is between $350,000 and $3 million, again depending on how much is at stake in the case. In other words, roughly 50–60 percent of the costs of a patent case lie in the claim construction and discovery phases of the case. As a result, the close of discovery can be a key point to re-explore settlement positions and reevaluate the business and legal outcomes and ramifications of the case.

Dispositive motion practice

Near the close of discovery in a patent case, or shortly thereafter, the parties typically file summary judgment motions on the issues and defenses they feel are dispositive in the case. Each court and/or judge has its own set of rules, process, and procedures governing dispositive motion practice. The motions typically present facts and expert’s arguments on case dispositive issues such as infringement, invalidity, laches and others. The number and complexity of the case dispositive issues, coupled with the process and procedures dictated by the court and/or judge, can affect the cost of dispositive motions. Rulings and/or pending motions from dispositive motion practice should be used as backdrop to reevaluate the business and legal outcomes and ramifications of the case, and to explore settlement if necessary or appropriate.

Pre-trial preparation

After the parties complete dispositive motion practice, they typically move into pre-trial preparation and then into trial. Pre-trial preparation encompasses all preparation work necessary to go to trial and is a considerable cost factor before the actual event. Depending on the judge and/or court, this can include preparation of all witness designations and counter-designations, documentary or other trial evidence and the parties’ objections thereto, the preparation of fact and/or expert witnesses who will provide testimony at trial, demonstratives, jury instructions, stipulated and disputed issues of fact and law, and all of the logistics involved in putting on a trial. The close of pre-trial preparation serves as the last key decision point upon which to reevaluate the business and legal outcomes and ramifications of the case, and explore settlement if necessary or appropriate.

Costs

So how much does it cost to take a patent case through trial? The answer truly is, “It depends.”

It depends on whether you are a plaintiff or a defendant. For example, as a plaintiff you likely get to choose the venue, and venue will determine the speed and sophistication of the docket. A fast and sophisticated docket will move through claim construction, discovery, dispositive motion practice, pre-trial preparation, and trial quickly, thereby affecting the cost of the case.

It depends on the complexity of the invention(s) or issues involved. Complexity will affect the number of experts required for the case. Complexity could also affect the number of documents, witnesses, or prior art involved, which also affect the cost of the case. It could also affect how dispositive motion practice is approached.

It depends on how litigious the parties are. Motion practice greatly increases the cost of a case, especially if the case is assigned to a judge or court with specialized motion practice rules and/or procedures.

It also depends on the cost and efficiency of your lawyers.

Lastly, it depends on how much is at stake in the case.

All of these factors, evaluated in light of the phases of a patent case, provide you with a framework with which to figure out how much it costs to try a patent case. In short, choose your teams wisely, know your teams, and reevaluate the legal and business goals of the case early and often.